Table by table, restaurants gain ground

Published: Tuesday, April 27, 2010

CHICAGO — It took more than a year, but American diners are coming out of hiding, starting to splurge on everything from tea to tacos and tacking on some dessert.

The meals aren't fancy — and business is far what it was before the recession sent the nation spiraling — but restaurateurs big and small say they're breathing a tentative sigh of relief as tables fill up.

At Deleece, a restaurant on Chicago's north side, crowds are bigger than they've been in months. It's noisier, too.

"People are out and they're spending a little more and maybe they're buying that extra appetizer they didn't before," said Brandon Canfield, the restaurant's chef.

In the depths of the recession, Deleece's customers might order a glass of wine, a salad and an entree. Now, they're more likely to get a bottle of wine, a hot appetizer and an entree. They'll also split a dessert, which adds up to bigger bills and full tables.

The shift, which Jefferies restaurant analyst Jeff Farmer calls a "slow grind," began in late January and is gaining steam.

"They're not necessarily seeing the light at the end of the tunnel, but there's a realization that things aren't going to get any worse than they are right now," Farmer said.

Still, it wasn't until March that the change became downright impressive, sending revenue in restaurant locations open at least a year up at scores of fast-food and casual dining chains. There the measure has stagnated for nearly two years, experts said.

Few restaurant chains release sales by month, but data from market research firm NPD Group showed the measure rose climbed for five of the past eight weeks at nearly four dozen fast-food and family-style restaurant chains.

At McDonald's Corp. it climbed 5 percent in March and at Brinker International Inc.'s Maggiano's Little Italy it was up 5.2 percent. There was a double-digit increase in the figure at Panera, which along with strong sales in January and February prompted the company to boost its profit forecast.

A number of factors could be behind the March upswing: An influx in cash from tax refunds; warm weather that drew people from their homes; or increasing confidence that the economic recovery isn't a mirage.

"A year ago at this time, all we talked about was the recession and whether we were going to become cavemen because the economy was collapsing," said Panera Bread Co. Chairman and CEO Ron Shaich. "I think we've returned to a time of business as usual, in the sense that we will survive."

The change is visible even in areas of the nation hit hardest by the housing crisis that fueled the recession.

At BJ's Restaurants Inc., sales during the quarter rose 8 percent in Arizona and climbed "in the low double digits" in Florida.

Meanwhile, The Cheesecake Factory Inc. said the important performance measure shot up in every area of the country during the first quarter — "even in California, which was a softer market for us through the recession," Chairman and CEO David Overton told investors Thursday.

The number of diners at Cheesecake's restaurants nationwide rose 1.7 percent. And they ordered more desserts. The chain's signature indulgences accounted for 15.2 percent of revenue, up from 14.7 percent the previous quarter.

Starbucks also managed to snag an increase in tea and coffee customers — its first in 13 quarters.

Mary Smith is among those who finds herself in restaurants more frequently.

The 47-year-old from Tigard, Ore., rarely dined out when she was unemployed. But since she began work as a legal assistant in January, she treats herself to lunch out once a week.

"I do it now for convenience," she said.

Early forecasts seem to show the first quarter's momentum is trickling into April. "It seems like people are out just spending more money." Jack Hartung, chief financial officer at Chipotle Mexican Grill, said on a conference call last week.

A further rebound might hinge on the recovery putting a dent in the nation's 9.7 percent unemployment rate.

I don't believe that the spending levels are going to get back to pre-recession levels until people have some confidence that they're going to have a place to go to work and can put food on the table at home or away from home," McDonald's CEO Jim Skinner told investors Wednesday.